The Great Proletarian Cultural Revolution, Disruptions to Schooling, and the Returns to Schooling in Urban China.

We identify the returns to schooling in urban China by exploiting individual-level variation in educational attainment caused by exogenous city-wide disruptions to education during the Cultural Revolution from 1966 to 1976. For city-cohorts who experienced greater disruptions, children’s educational attainment became less correlated with that of their fathers and more influenced by whether fathers held administrative positions. Analyzing data from the China Urban Labor Survey (CULS) conducted in 5 large cities in 2001, we estimate the returns to college to be 35 percent using instrumental variables, which is notably lower than the OLS estimate of 42 percent. In contrast, our IV estimates of the returns to high school average 28 percent, higher than the OLS estimate of 21 percent. The IV and OLS estimates of the mean return to a year of schooling are 7.6 and 8.3 percent. These results are consistent with the selection of high-ability students into higher education through China’s college entrance exam system. We demonstrate that our results are unlikely to be driven by sample selection bias associated with migration, or by alternative pathways through which the Cultural Revolution could have affected adult productivity